Auditor Report of Emtex Industries (India) Ltd.

Mar 31, 2011

We have audited the attached Balance Sheet of Emtex Industries (India)
Ltd, as at 31st March 2011 and also the Profit and Loss Account and the
Cash Flow Statement for the year ended on that date, annexed thereto.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We have conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.

As required by the Companies (Auditor's Report) Order, 2003 issued by
the Central Government of India in terms of sub-section (4A) of Section
227 of the Companies Act, 1956, we enclose in the ANNEXURE a statement
on the matters specified in paragraphs 4 and 5 of the said Order.

1. Further to our comments in the ANNEXURE referred to above, we
report that:

(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary. for the purposes of
our audit.

(ii) In our opinion,, proper books of account as required by law have
been kept by the company so far as appears from our examination of
those books, except the cost accounting records required under section
209 (1) (d) of the Companies Act 1956.

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow
Statement Account dealt with by this report are in agreement with the
books of account.

(iv) in our opinion, the Balance Sheet, Profit and Loss Account and
Cash Flow Statement dealt with by this report comply with the
accounting standards referred to in sub- section (3C) of section 211 of
the Companies Act, 1956 except Accounting Standard -15 on Accounting
for Retirement benefits in the Financial Statements of Employers with
regards to provision of gratuity and leave encashment and Accounting
Standard - 11 on Accounting for Effects of Changes in Foreign Exchange
Rates. (Refer Note 5 of Schedule XII).

1) The company doesn't have a whole time Company Secretary as on date
as required under section 383-A of the Companies Act, 1956.

2) Export related receivables have not been revalued at the exchange
rate prevailing at the end of the year in accordance with the
Accounting standard 11 issued by the institute of chartered accountants
of India and accordingly the debtors are overstated by Rs. 2.29 lacs
(Previous year Rs. 1.22 lacs) and creditors are overstated by Rs.1.02
lacs and thereby loss is understated to the extent of Rs. 1.27 lacs
(Previous year Rs. 1.22 lacs) refer note 5 of schedule XII.

3) The companies has not accounted and not worked out for interest
payable on the borrowed amount during the year under consideration.

4) The company has not redeemed the Debentures and also not created
Debenture Redemption Reserve till 31st March, 2011. (Refer Note 6 of
Schedule XII)

5) Cost audit has not been conducted as ordered by the Central
Government under Section 233-B of the Companies Act, 1956.

6) The company has not transferred the unclaimed and unpaid dividend of
Rs. 55,502, & Rs. 13,140 for the financial years 1995-96, 1998-99
respectively to Investor Education and Protection Fund as required
under sub section (2) of section 205C of the Companies Act, 1956 being
the amounts have remained unclaimed and unpaid for a period of more
than seven years from the date they became due for payment.

(v) Subject to the foregoing, in our opinion and to the best of our
information and according to the explanations given to us, the said
accounts give the information required by the Companies Act, 1956, in
the manner so required.

a. in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2011; and

b. in the case of the Profit and Loss Account, of the loss for the
year ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.

ANNEXURE referred in paragraph of our report to the members of Entex
Industries (India) Limited for the year ended 31st March, 2011

1. The Company is maintaining proper records showing full particulars
of quantitative details and situation of fixed assets. The management
at reasonable intervals has carried out the physical verification of
fixed assets and no material discrepancies were noted on such
verification. There was no substantial disposal of fixed assets during
the year.

2. None of the fixed assets have been revalued during the year.

3. The management at reasonable intervals has physically verified the
stocks of finished goods, spare parts and raw materials. The procedures
of physical verification of stocks followed by the management are, in
our opinion, reasonable and adequate in relation to the size of the
Company and the nature of its business. No material discrepancies were
noticed on physical verification of stocks.

4. The company has not given / taken any loans to /from companies,
parties listed in the register maintained under section 301 of the
Companies Act, 1956. The parties to whom the loans or advances in the
nature of loans have been given by the Company, where the terms of
recovery are stipulated, are repaying the principal amount and
interest. Further the company has given advances of Rs. 109.99 Lacs to
suppliers for the specific orders are remained outstanding for more
than three years.

5. In our opinion, and according to information and explanation given
to us, there are adequate internal control procedures commensurate with
the size of the company and the nature of its business for the purchase
of stores, raw material including components, plant and - machinery,
equipment and other assets and for the sale of goods.

6. In our opinion and according to the information and explanations
given to us, there are no " parties listed in the register maintained
under section 301 of the Companies Act, 1956, and hence no transaction
pursuance of contracts or arrangements that need to be entered into the
register maintained u/s.301 of the Companies Act, 1956 have taken place
in this regard.

7. The Company has not accepted any deposits from the public within
the meaning of Sections 58A and 58AA of the Act and the rules framed
there under.

8. In our opinion the company has adequate internal audit system
commensurate with the size and nature of its business.

9. According to the explanation given to us by the company , the
maintenance of cost records is not applicable as prescribed by the
Central Government under section 209(1) (d) of the companies act 1956,
Since the Company is exclusively engaged in processing of fabrics

10. According to the records of the company, the Company is generally
regular in depositing undisputed statutory dues including Provident
Fund, Employees' State Insurance, Sales Tax, Customs Duty, Wealth Tax,
Excise Duty, Cess and other statutory dues as applicable to it with the
appropriate authorities. However, in respect of Income tax and other
direct taxes, following un-disputed demands are dues.

Status Amount
(in lacs) Period to which it relates

Income Tax 3.30 Assessment Year 98-99

Income Tax 204.71 Assessment Year 99-00

Income Tax 49.97 Block Period

According to the records of the Company there are no dues in respect of
sales tax, custom duty, wealth tax, excise duty and cess as at March,
31, 2011, which have not been deposited with the respective
authorities. However, in respect of income tax, following disputed
demands are pending.

Status Amount
(in lacs) Period to which Forum where
it relates dispute is

Income Tax
(Penalty) 57.08 2000-01 ITAT, Mumbai

Income Tax 208.14 2000-01 ITAT, Mumbai

Income Tax 394.75 1997-98 ITAT, Mumbai

Income Tax
(Penalty) 110.16 1997-98 ITAT, Mumbai

11. The Company has accumulated losses amounting to Rs. 23,067.09 Lacs
(Previous Year Rs, 22,764.09 lacs) as at March 31, 2011.During the year
and in immediately preceding financial year it has incurred cash loss
amounting to Rs. 224.32 lacs (Previous year cash profit of Rs. 13.68
lacs).

12. On the basis of the records examined by us and the information and
explanation given to us, the company has defaulted in repayment of dues
to the financial institutions, bank and debenture holders. During the
year, the company has not borrowed from financial institutions and bank
and by way of debentures. The Company has not worked out interest on
borrowed amounts and hence not provided to the Profit & Loss Account.

13. In our opinion and according to the information and explanation
given to us, no loans and advances has been granted by the company on
the basis of security by way of pledge of shares, debentures and other
securities.

14. In our opinion and according to the information and explanation
given to us, the nature of activities of the company does not attract
any special statute applicable to chit fund/nidhi/mutual benefit
fund/societies accordingly clause 4 (xiii) of the companies (Auditor
Report) order, 2003 is not applicable to the company.

15. Based on our Audit procedures and the information and explanation
given by the management, we are of the opinion that the Company is fiat
dealing / trading shares, securities, debentures and other investments.
Accordingly, clause 4 (xiv) of the Companies (Auditor's Report) order,
2003 is not applicable to the company.

16. In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for loans taken by
others from Banks or financial institutions during the year.

17. In our opinion and According to the information and explanations
given to us, on an overall examination of balance sheet, we report that
term loans were applied for the purposes for which the loans were
obtained.

18. According to the information and explanation given to us, and on
an overall examination of the balance sheet of the company, we report
that no funds raised on short-term basis have been used for long-term
investment by the company. The company has not raised any funds during
the year on long-term basis.

19. The Company has not made any preferential allotment of shares
during the year.

20. The Company has not issued any debentures during the year.

21. The Company has not raised any money through a public issue during
the year.

22. During the course of our examination of the books and records of
the Company, carried out accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the Management.

For N. G. Jain & Co.

Chartered Accountants

(Mukesh mehta)

Partner

Membership no. 100407

Place: Mumbai

Date: 22nd July, 2011

Mar 31, 2010

We have audited the attached Balance Sheet of Emtex Industries (India)
Ltd, as at 31st March 2010 and also the Profit and Loss Account and the
Cash Flow Statement for the year ended on that date, annexed thereto.
These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We have conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.

As required by the Companies (Auditors Report) Order, 2003 issued by
the Central Government of India in terms of sub- section (4A) or
Section 227 of the Companies Act, 1956, we enclose in the ANNEXURE a
statement on the matters specified in paragraphs 4 and 5 of the said
Order.

2. Further to our comments in the ANNEXURE referred to above, we
report that:

(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit.

(ii) In our opinion, proper books of account as required by law have
been kept by the company so far as appears from our examination of
those books, except the cost accounting records required under section
209 (1) (a) of the Companies Act 1956.

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow
Statement Account dealt with by this report are in agreement with the
books of account.

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and
Cash Flow Statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956 except Accounting Standard - 15 on Accounting
for Retirement benefits in the Financial Statements of Employers with
regards to provision of gratuity and leave encashment and Accounting
Standard. 11 on Accounting for Effects of Changes in Foreign Exchange
Rates. (Refer Note 5 of Schedule XII).

(v) In terms of clause (g) of sub section (1) of Section 274 of the
Companies Act, 1956 all Directors of the company other than nominee
directors are disqualified for being director of any other public
Company.

1) The company doesnt have a whole time Company Secretary as on date
as required under section 383-A of the Companies Act, 1956.

2) Export related receivables have not been revalued at the exchange
rate prevailing at the end of the year in accordance with Accounting
Standard 11 issued by the Institute of Chartered Accountants of India
and accordingly debtors are overstated by 1.22 lacs (previous year Rs.
1.92 lacs understated) and accordingly the loss is understated to the
extent of 1.22 lacs (previous year Rs. 1.92 lacs loss overstated),
Refer Note no. 5 of Schedule XII).

3) The company has not accounted and not worked out for interest
payable on the borrowed amount during the year under consideration
(previous year Rs.7631.29 lacs).

4) The company has not redeemed the Debentures and also not created
Debenture Redemption Reserve till 31" March, 2010. (Refer Note 6 of
Schedule XII)

5) Cost audit has not been conducted as ordered by the Central
Government under Section 233-B of the Companies Act, 1956.

6) The company has not transfer the unclaimed and unpaid dividend of
Rs. 55,502, & Rs. 13,140 for the financial years 1995-96, 1998-99
respectively to Investor Education and Protection Fund as required
under sub section (2) of section 205C of the Companies Act, 1956 being
the amounts have remained unclaimed and unpaid for a period of more
than seven years from the date they became due for payment.

Subject to the foregoing, in our opinion and to the best of our
information and according to the explanations given to us, the said
accounts give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;

a. in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2010; and

b. in the case of the Profit and Loss Account, of the loss for the
year ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.

ANNEXURE referred to in paragraph 3 of our report to the members of
Emtex Industries (India) Limited for the year ended 31st March, 2010.

1. The Company is maintaining proper records showing full particulars
of quantitative details and situation of fixed assets. The management
at reasonable intervals has carried out the physical verification of
fixed assets and no material discrepancies were noted on such
verification. There was no substantial disposal of fixed assets during
the year.

2. None of the fixed assets have been revalued during the year.

3. The management at reasonable intervals has physically verified the
stocks of finished goods, spare parts and raw materials. The procedures
of physical verification of stocks followed by the management are, in
our opinion, reasonable and adequate in relation to the size of the
Company and the nature of its business. No material discrepancies were
noticed on physical verification of stocks.

4. The company has not given / taken any loans to /from companies,
parties listed in the register maintained under section 301 of the
Companies Act, 1956. The parties to whom the loans or advances in the
nature of loans have been given by the Company, where the terms of
recovery are stipulated, are repaying the principal amount and
interest. Further the company has given advances of Rs. 109.99 to
suppliers for the specific orders are remained outstanding for more
than three years.

5. In our opinion, and according to information and explanation given
to us, there are adequate internal control procedures commensurate with
the size of the company and the nature of its business for the purchase
of stores, raw material including components, plant and machinery,
equipment and other assets and for the sale of goods.

6. In our opinion and according to the information and explanations
given to us, there are no parties listed in the register maintained
under section 301 of the Companies Act, 1956, and hence no transaction
in pursuance of contracts or arrangements that need to be entered into
the register maintained u/s.301 of the Companies Act, 1956 have taken
place in this regard.

7. The Company has not accepted any deposits from the public within
the meaning of Sections 58A and 58AA of the Act and the rules framed
there under.

8. In our opinion the company has adequate internal audit system
commensurate with the size and nature of its business.

9. According to the explanation given to us by the company , the
maintenance of cost records is not applicable as prescribed by the
Central Government under section 209(1) (d) of the companies act 1956,
Since the Company is exclusively engaged in processing of fabrics

10. According to the records of the company, the Company is generally
regular in depositing undisputed statutory dues including Provident
Fund, Employees State Insurance, Sales Tax, Customs Duty, Wealth Tax,
Excise Duty, Cess and other statutory dues as applicable to it with the
appropriate authorities.

However, in respect of Income tax and other direct taxes, following
un-disputed demands are dues.

Statute Amount (in lacs) Period to which it relates

Income Tax 3.30 Assessment Year 98-99

Income Tax 204.71 Assessment Year 99-00

Income Tax 49.97 Block Period

According to the records of the Company there are no dues in respect of
sales tax, custom duty, wealth tax, excise duty and cess as at March,
31, 2010, which have not been deposited with the respective
authorities. However, in respect of income tax, following disputed
demands are pending.

Statute Amount Period to which Forum where
Pending

Income Tax 208.14 A.Y.2000-01 ITAT, Mumbai

Income Tax 945.48 A.Y. 1997-98 ITAT, Mumbai

Income Tax (Penalty) 57.08 A.Y.2000-01 CIT (Appeal)

11. The Company has accumulated losses amounting to Rs. 22,764.09 Lacs
(Previous Year Rs, 22,687.89 lacs) as at March 31, 2010. During the
year and in immediately preceding financial year it has incurred cash
profit amounting to Rs. 13.68 lacs (Previous year loss of Rs. 230.42
lacs).

12. On the basis of the records examined by us and the information and
explanation given to us, the company has defaulted in repayment of dues
to the financial institutions, bank and debenture holders. During the
year, the company does not have any borrowings, from financial
institutions and by way of debentures.

13. In our opinion and according to the information and explanation
given to us, no loans and advances has been granted by the company on
the basis of security by way of pledge of shares, debentures and other
securities.

14. In our opinion and according to the information and explanation
given to us, the nature of activities of the company does not attract
any special statute applicable to chit fund/nidhi/mutual benefit
fund/societies accordingly clause 4 (xiii) of the companies (Auditor
Report) order, 2003 is not applicable to the company.

15. Based on our Audit procedures and the information and explanation
given by the management, we are of the opinion that the Company is not
dealing / trading in shares, securities, debentures and other
investments. Accordingly, clause 4 (xiv) of the Companies (Auditors
Report) order, 2003 is not applicable to the company.

16. In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for loans taken by
others from Banks or financial institutions during the year.

17. In our opinion and according to the information and explanations
given to us, on an overall examination of balance sheet, we report that
term loans were applied for the purposes for which the loans were
obtained.

18. According to the information and explanation given to us, and on
an overall examination of the balance sheet of the company, we report
that no funds raised on short-term basis have been used for long-term
investment by the company. The company has not raised any funds during
the year on long-term basis.

19. The Company has not made any preferential allotment of shares
during the year.

20. The Company has not issued any debentures during the year.

21. The Company has not raised any money through a public issue during
the year.

22. During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information ahd
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the Management.